Decrease in the labour force, just slowed down by large-scale selective immigration

High levels of household debt (165% of disposable income) / very high house prices

Weakening energy exports due to inadequate supply pipelines to the United States and the US’s own resources

RISK ASSESSMENT

Towards moderate growth

After progressing strongly in 2017, in connection with the boom in consumption and the recovery of business investment, activity is expected to settle at a pace closer to its growth potential estimated at 1.6%, with a significant gap remaining between the Atlantic provinces and the rest of the country. Household spending is expected to lose steam. Real disposable incomes and jobs will not rise as fast and the effects of income tax cuts and higher transfers to the middle and lower-income households in 2017 will dissipate. Settling property prices (excluding the regions of Vancouver and Toronto where prices will continue to rise) will dampen the wealth effect sparked by surging prices in the last two years. Credit, although still cheap, could get more expensive, if the central bank raises its key rate (1% in December 2017), which it could decide to do given the increased inflationary pressures and near full employment. Residential construction could taper off, especially because new prudential regulations are due to be adopted on credit in order to ease the pressure on the market and strengthen the banks. 45% of outstanding credit awarded by the six largest banks, which account for 93% of the banking industry’s assets, relate to property and over half of borrowers are not insured. Against this, business investment is expected to remain robust due to growing capacity constraints, firm hydrocarbon prices and a still strong credit environment. The increase in corporate profits, even if slower than in 2017, should point in the same direction. Public investment in transport, renewable energy, housing, and early childhood is expected to remain firm in the context of a still fairly accommodative fiscal policy, especially since a public infrastructure investment bank has just been set up. The contribution of external trade to growth will be weak. While exports of energy (hydrocarbons and electricity), metals (gold, aluminium, copper, iron, nickel), agricultural products (oilseed crops, cereals, meat, legumes) and shellfish will continue on a steady upward trend, especially in terms of price, other exports (vehicles, engines, automotive components, planes, polymers, medicines, paper) are expected to benefit only moderately from healthy world demand and a Canadian dollar which has appreciated along with oil prices but is still relatively under-valued against the US dollar. This needs to be set against the loss of manufacturing competitiveness which coincided with the period of high oil prices. Meanwhile, timber exports will continue to be hit by countervailing duties applied by the United States. The end to renegotiations over NAFTA and the possible negative repercussions are unlikely to happen until 2019.

Low public deficit, significant trade deficit when excluding energy

While public debt (40% federal, 60% provincial or local) accounts for almost 100% of GDP, the modest nature of the public deficit, moderate growth and low interest rates will suffice to stabilise it. Moreover, thanks to its low cost due to its triple A rating, it is perfectly sustainable, especially as net of financial assets held by the federation and the Canada and Quebec pension funds, it accounts for just 28% of GDP. Quebec and Ontario are the two most indebted provinces, with 80% of net provincial debt and a share of their respective GDP of 47% and 38%. But they represent 60% of Canadian GDP and population and will maintain a cautious fiscal policy with a fiscal balance close to equilibrium.

Energy exports do not suffice to offset the significant deficit in trade of other goods (5% of GDP). The services deficit and investment income deficit (ca. 1% of GDP each) come on top of the trade deficit (1% of GDP). Given that investments abroad are higher than FDIs, financing the current account deficit relies on foreign portfolio investments. The result is growing external debt (115% of GDP in 2016), mainly contracted by banks and businesses - a reflection of inadequate domestic savings.

Proactive Prime Minister Justin Trudeau

Justin Trudeau was sworn in as Prime Minister of Canada following the October 2015 parliamentary elections, succeeding the Conservative Stephen Harper, who had been in post for almost ten years. Mr Trudeau’s (centre-left) Liberal party won 184 of 338 seats in parliament, giving it an absolute majority. The focus was quickly put on inclusive growth with tax cuts for the middle classes, higher family benefits and the development of environmentally-friendly infrastructure. However, this did not prevent the government from supporting the Trans Mountain Pipeline Project between Alberta and the Pacific coast. Differences with the United States have multiplied on diplomatic and trade issues (timber, aeronautics, dairy products), resulting in a move to strengthen ties with other countries, as in the trade agreement between Canada and the EU, signed in late 2016. The Prime Minister also aims to reduce obstacles to trade between the country’s ten provinces where non-tariff barriers are still hampering the circulation of goods, capital and people.

Last update: January 2018

Payment

A single law governs bills of exchange, promissory notes and cheques throughout Canada; however this law is frequently interpreted according to common law precedents in the nine provinces or according to the civil code in Quebec. As such, sellers are well advised to accept such payment methods unless where long-term commercial relations, based on mutual trust, have been established with buyers.

Centralised accounts, which greatly simplify the settlement process by centralising settlement procedures between locally based buyers and sellers, are also used within Canada.

SWIFT bank transfers are the most commonly used payment method for international transactions. The majority of Canadian banks are connected to the SWIFT network, offering a rapid, reliable and cost-effective means of payment, notwithstanding the fact that payment is dependent upon the client’s good faith insofar as only the issuer takes the decision to order payment.

A real time electronic fund transfer system in operation since February 1999 – the Large Value Transfer System, or LVTS introduced by the Canadian Payments Association – facilitates electronic transfers of Canadian dollars countrywide and can also handle the Canadian portion of international operations.

The letter of credit (L/C) is also frequently used.

Debt collection

Canada’s Constitution Act of 1867, amended in April 1982, divides judicial authority between the federal and provincial Governments. Therefore, each province is responsible for administering justice, organizing provincial courts and enacting the civil procedure rules applicable in its territory. Though the names of courts vary between provinces, the same legal system applies throughout the country, bar Quebec.

Within each province, provincial courts hear most disputes of all kinds concerning small claims, and superior courts hear large claims – for example, the Quebec superior court hears civil and commercial disputes exceeding CAD 70,000 and jury trials of criminal cases. Canadian superior courts comprise two distinct divisions: a court of first instance and a court of appeal.

At federal level, the Supreme Court of Canada, in Ottawa, and only with “leave” of the Court itself (leave is granted if the case raises an important question of law), hears appeals against decisions handed down by the provincial appeal courts, or by the Canadian Federal Court (stating in appeal division), which has special jurisdiction in matters concerning maritime law, immigration, customs and excise, intellectual property, disputes between provinces, and so on.

The collection process begins with the issuance of a final notice, or “seven day letter”, reminding the debtor of his obligation to pay together with any contractually agreed interest penalties.

Ordinary proceedings

Ordinary legal action – even if the vocabulary used to describe it may vary within the country – proceeds in three phases.

Firstly, the “writ of summons” whereby the plaintiff files his claim against the defendant with the court, then the “examination for discovery”, which outlines the claim against the defendant and takes into account the evidence to be submitted by each party to the court and, finally, the “trial proper” during which the judge hears the adverse parties and their respective witnesses, who are subject to examination and cross-examination by their respective legal counsels, to clarify the facts of the case before making a ruling.

Enforcement of a legal decision

In most cases, except when the judge decides otherwise, each party is required to bear the full cost of the fees of his own attorney whatever the outcome of the proceedings. As for court costs, the rule stipulates that the winning party may demand payment by the losing party based on a statement of expenses duly approved by the court clerk.

The change precisely concerns institution of a standard “originating petition” (requête introductive d’instance), with the payment of judicial costs joined, introducing a 180-day time limit by which the proceedings must be scheduled for “investigation and hearings” (pour enquête et audition), delivery of a judgement on the content within a timeframe of six months after the case was heard and encouragement of the parties to submit to a conciliation stage during legal proceedings, with the judge presiding over an “amicable settlement conference” (conférence de règlement à l’amiable).